June 14 (Bloomberg) -- Euro-area inflation slowed for a
second month in May, led by cooling prices for energy and food.

The inflation rate in the 17-nation euro area fell to 2.4
percent from 2.6 percent in April, the European Union’s
statistics office in Luxembourg said today. That’s in line with
an initial estimate published on May 31. Energy prices rose 7.3
percent, down from 8.1 percent a month earlier, while food cost
growth slowed to 2.3 percent from 2.7 percent.

Crude-oil prices have dropped about 19 percent in the past
two months, while global food costs had their biggest decline in
more than two years in May, easing inflation pressures. The euro
has fallen 6 percent against the dollar in the second quarter as
the sovereign debt crisis worsens, raising the cost of goods
imported to the 17-nation single-currency area.

“Disinflation is ongoing, but very gradually, and the
falling euro is slowing down the process,” Michel Martinez, an
economist at Societe Generale in Paris, said in a research note.

Data yesterday showed industrial production in the region
dropped 0.8 percent in April, a second consecutive decline,
adding to signs of a deepening economic slump. The Frankfurt-based European Central Bank forecast on June 6 that the economy
will shrink 0.1 percent this year and lowered its projection for
2013 to 1 percent from 1.1 percent.

Price Stability

The ECB, which aims to keep inflation just below 2 percent,
maintained its benchmark rate at 1 percent this month. Policy
makers also forecast that inflation will average 2.4 percent
this year and 1.6 percent in 2013.

“While inflation rates are likely to stay above 2 percent
for the remainder of 2012, over the policy-relevant horizon we
expect price developments to remain in line with price
stability,” ECB President Mario Draghi said the day the
forecasts were announced.

Still, Bundesbank board member Andreas Dombret said on June
12 that the ECB’s long-term loans carry price risks that might
exacerbate the crisis.

“Over the medium to long term, continued provision of
ample liquidity might, through various channels, de-anchor
inflation expectations, which would translate into higher
inflation risks,” Dombret said in a speech in London. “It
could also pave the way for new asset bubbles, thereby sowing
the seeds of the next crisis.”

Nominal hourly labor costs in the euro area rose 2 percent
in the first quarter from the year-earlier period, a separate
report showed today.